Singapore well-placed to weather economic storm, says Minister Chan Chun Sing

SINGAPORE (July 8): Singapore used to see its port operator, PSA, as just a port that is critical to Singapore because of the container trade that it facilitates for the city state as well as the trade between other countries that happens on PSA’s platform.

But that alone is not good enough because trade routes can shift, leaving Singapore’s PSA behind. Global supply chains and production methods, too, can change.

So the company has gone on to build a string of ports across the world, letting global players trade on this Singapore platform.

This is one way that Singapore is helping its companies “use the world as our hinterland”, said Minister for Trade and Industry Chan Chun Sing.

“So even if the goods do not come to Singapore, or come through Singapore, they will trade on the PSA platform or on the Singapore platform,” says Chan.

Chan said this is a new way of looking at how local companies should do business, and how agencies such as Entreprise Singapore is helping local businesses to “never be constrained by our geographical size or geographical location”.

The minister was speaking in Parliament on Monday where he answered six questions from members of the House on Singapore’s economy and the impact of the US-China trade war.

Chan said that consumer and business confidence have been dampened but there are “pockets of strength” in the information and communications sector; education, health, and social services sector; and the construction sector has also turned around after three years of contraction. He said the labour market remains resilient with a continued rise in employment in the first quarter of the year and low unemployment at 2.2%.

He said that in the medium-term, Singapore’s outlook will be determined by how this US-China trade conflict develops, how Singapore’s major exports markets perform, and how the technology is used to create new opportunities. The risks are that an increasingly protectionist global environment will reduce the country’s access to markets, and new global rules on harmonised corporate tax rates and carbon caps can affect Singapore’s growth potential.

To overcome these challenges, Chan said Singapore has three strategies. First is to strengthen what has distinguished the republic from the competition, including having a stable political environment, a pro-business environment with strong rule of law, superior connectivity in supply chains and distribution networks, a skilled workforce and tripartite partnership linking unions, employers and the government.

The second is to constantly refresh offerings to business and investors, such as creating new niches in additive manufacturing and advanced materials that meets demands from emerging industries such as electric vehicles and promoting a conducive global and regional business environment such as going into digital trade.

The third is to create new trade links through trade agreements like the Regional Comprehensive Economic Partnership (RCEP) and the Pacific Alliance Free Trade Agreement (FTA) which involves negotiations with Chile, Colombia, Mexico and Peru, which Singapore traded $5.9 billion in goods with last year.

Chan added that while the US-China trade war has seen parts of the global supply chain shift elsewhere, Singapore cannot expect to attract all of those relocations because some are looking for large scale of production, and low land and labour costs. What Singapore can compete on is its strengths of trust, standards, quality assurance and Intellectual Property.

Pointing to the opening of the pharmaceutical giant GSK’s two new $130 million production facilities last week, Chan said GSK’s investment “reflected its confidence in Singapore’s future”.

Chan also assured the House that the government is closely monitoring economic developments.

“While there are clouds looming, we believe we have the fundamentals to weather the storm. Our economic fundamentals are sound, we’re in a strong fiscal position, and we’re making good progress in restructuring our economy,” says Chan.

“The government also stands ready to step up our support for companies and workers in sustaining our core capabilities and enhancing our competitiveness to seize new opportunities,” he adds.

The Ministry of Trade and Industry had in May projected that Singapore’s economy would grow between 1.5-2.5% this year. Chan said MTI will review the forecast next month, taking into account the full set of economic data for the second quarter and the latest external conditions.